Kentucky state officials expect a $23 million annual tax payout from legal sports betting “at full implementation”, according to Gov. Andy Beshear’s office. But industry experts say that projection is a bit conservative.
Revenue projections by industry analysts Eilers & Krejcik Gaming sent to Gaming Today estimate that Kentucky will see annual tax revenues of $34.2 million from sports betting in 2027. That’s based on EKG projections of annual Kentucky sports betting gross gaming revenue (GGR) totaling $252 million, with corresponding tax rates of 14.25% mobile and 9.75 percent retail. Mobile market share of 85% in Kentucky is assumed by Gaming Today.
Projected Kentucky Sports Betting and Tax Revenue
In terms of mobile versus retail, Kentucky can expect $214 million online GGR and $37.8 million retail GGR at maturity based on EKG’s projections and a ballpark 85% mobile/15% retail market split seen in other states.
| Dates | Total GGR | Online GGR | Retail GGR | Tax Revenue |
|---|---|---|---|---|
| Sept.-Dec. 2023 | $29M | $24.65M | $4.35M | $3.94M |
| 2027 | $252M | $214.2M | $37.8M | $34.21M |
Tracks and simulcasting facilities can expect increased revenues due to retail sports betting, although online apps will dominate the space.
“A stronger retail presence is always a net positive for retail sports betting revenue. But online will represent the overwhelming majority of revenue in Kentucky, just as it has in other states,” EKG wrote to Gaming Today in an email on Aug. 17.
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Kentucky Sports Betting Market Share Concentrated in Five, Six Apps
Kentucky’s sports betting market share will be concentrated in a handful of apps, according to EKG’s Chris Grove.
That’s not unexpected. Control of the market by a handful of apps is a pattern seen nationally, where brands FanDuel, DraftKings, BetMGM, and Caesars typically sit at the top.
Each of those sportsbooks is among the nine service providers that had temporary licenses approved by the Kentucky Horse Racing Commission (KHRC) on Tuesday. Each is expected to launch a mobile app on or around Sept. 28 tied to their state-licensed horse racetrack partner. A few of those sportsbooks – Caesars, DraftKings, and BetMGM – plus Kambi will also operate retail sports betting for tracks or simulcasting facilities owned by tracks, with retail launch on Sept. 7.
And two new mobile sportsbooks have been approved in Kentucky after receiving temporary license approval by KHRC on Tuesday: Fanatics, now live in four states, and ESPN Bet KY (which is replacing Barstool as Penn Entertainment’s sportsbook brand in current and emerging markets).
Circa and Bet365 round out the list of approved Kentucky online operators to date.
Grove believes that top brands will get the majority of the revenue.
“There’s not a great reason to expect that we’ll see Kentucky deviate meaningfully from the pattern we’ve seen in other states, where the overwhelming majority of market share has been concentrated in five or six apps,” he told Gaming Today. “Low single-digit market share appears to be what’s available for the challenger brands.”
Industry Analysts: $29M GGR for 3Q 2023
No official state budget projection has been released for the four or so months sports betting will live in Kentucky this year. The $23 million figure applies to the market at maturity; it doesn’t accurately reflect the current state fiscal year that began July 1, 2023 (with only 10 months of reportable revenue from retail launch).
No quarterly state projections for legal sports betting were found in a search of budget documents attached to the state’s sports betting law (2023 House Bill 551). Additionally, a search of the State Budget Director’s Office website did not immediately yield quarterly sports betting revenue projections.
But EKG told Gaming Today it projects the Bluegrass State will end 2023 with $29 million in total GGR, assuming a Q3 launch. That would give the Commonwealth in the neighborhood of $3.9 million in tax revenue for 2023 in a market that is majority mobile.
College Sports Fandom and Kentucky
EKG also told Gaming Today it sees a sports betting market focused on collegiate sports in Kentucky – a state with no in-state pro sports franchises. According to EKG, tracking of fandom levels in Kentucky “massively over-indexes in college sports fandom, particularly in basketball.”
”In light of that dynamic, we expect Kentucky operators will develop localized, college sports-focused products,” EKG said.
Kentucky’s emphasis on college sports and the absence of in-state pro sports is, as EKG tells Gaming Today, “a relatively unique dynamic.”
But college basketball has proven to be a huge market nationally as well.
According to a March 12 press release from the American Gaming Association, one-quarter of all American adults (or 68 million people) were expected to wager over $15 billion on the 2023 NCAA Men’s Division 1 basketball tournament alone. That is 18 million more Americans than those who wagered on the 2023 Super Bowl.
In Kentucky – home to historic collegiate basketball programs (University of Kentucky and Louisville) and strong athletic programs at universities and colleges across the Commonwealth – the potential market is nothing to overlook. Neither is the market for betting on US professional sports, international sporting events like the Olympics and World Cup soccer, and esports, all legal sports betting events under Kentucky law.
Exactly which events will be open for wagering will be part of the state’s sports wagering catalog. That document is expected to be released by KHRC as early as next week.
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